EPIC is to healthcare what IBM was to enterprise circa 1980
Epic systems in 2024 resembles IBM in the enterprise market in 1980 — dominant and, at the same time, fragile. Both companies secured strong positions in their respective industries, with Epic’s electronic health records (EHR) systems deeply entrenched in the healthcare sector, much like IBM’s mainframe systems were in the enterprise space. However, this dominance comes with inherent risks, primarily due to a lack of innovation, high costs, and inflexibility in adapting to rapidly changing market demands.
In the 1980s, IBM was a giant in enterprise computing, but its monolithic, one-size-fits-all solutions became increasingly criticized. The company’s reluctance to innovate quickly and provide more flexible, department-specific software left a gap in the market. This void was filled by the emergence of specialized software companies in areas like finance, marketing, sales, and logistics, eventually leading to the rise of the Software as a Service (SaaS) industry. For example, Oracle and SAP capitalized on the demand for specialized finance and ERP solutions, offering more adaptable and user-friendly platforms tailored to the specific needs of financial departments. Salesforce emerged as a dominant player in the CRM space, revolutionizing sales and marketing with its cloud-based solutions, offering flexibility and innovation that IBM’s traditional systems could not match. In logistics, companies like JDA Software (now Blue Yonder) offered specialized supply chain management solutions that were far more responsive to the needs of logistics and operations teams than IBM’s broader offerings.
A significant catalyst that fueled the rise of these departmental solutions was the introduction of personal computers (PCs) into the enterprise. Unlike the centralized IBM mainframes, PCs were more accessible and allowed individual departments to make purchasing decisions independently. This shift was met with strong objections from IT departments, which had historically bought and maintained the IBM mainframes. IT departments resisted the adoption of PCs because it threatened their central control over technology within the organization. The introduction of PCs meant that the power to make purchasing decisions shifted from IT to departmental business owners. This change forced IT into a new role, no longer as the sole decision-maker and gatekeeper of technology but as a supporting partner to the business departments. IT had to collaborate with these departments to ensure the successful integration of PCs, marking a significant shift in the relationship between IT and the rest of the organization.
The shift to enterprise departmental solutions created an optimization loop that continuously improved software through a more efficient, localized process rather than a centralized one. Instead of a single, large budget going to IBM for a broad, generalized solution, the budget was divided among various departments, each selecting vendors that specialized in meeting their specific needs. This decentralization meant that vendors were directly accountable to the departments they served, responding quickly to feedback and making targeted enhancements to their products. As departments invested in solutions that directly addressed their unique challenges — whether in finance, sales, or marketing — their purchasing decisions became a driving force behind continuous improvement. This localized optimization loop allowed for faster, more relevant product development, making the software increasingly better suited to the specific tasks at hand, in stark contrast to the slower, less responsive innovation that came from centralized control under a single vendor like IBM. This cycle not only accelerated innovation but also ensured that every dollar spent had a direct and measurable impact on enhancing departmental productivity and efficiency.
This decentralization empowered departments to innovate more rapidly and adopt solutions better suited to their individual requirements. The result was a significant reduction in costs, as departments could purchase and implement more targeted, efficient solutions. Additionally, the growth in productivity and profits within the global enterprise sector was remarkable, as businesses were able to innovate faster and tailor their IT solutions to meet specific needs, leading to more effective operations across the board. Although it took Microsoft several decades to fully unseat IBM’s dominance, the trend toward departmental autonomy and innovation was evident within just a few years of the PC’s introduction. The eventual widespread adoption of PCs across enterprises reshaped the business technology landscape, leading to a more decentralized, flexible, and innovative approach to IT solutions.
Healthcare today finds itself in a similar position with Epic as the centralized vendor, capturing nearly 90% of each dollar invested in software innovation, often delivering a poor return on that investment. While Epic dominates the market with its comprehensive EHR systems, these systems are frequently criticized for their inflexibility and high costs. Unlike the enterprise sector, where departmental control over purchasing has spurred greater innovation and cost savings, healthcare remains largely centralized in its purchasing decisions. Epic views central IT and finance departments as its primary customers, often providing a one-size-fits-all solution that spans all departments. While this centralized approach may offer some efficiencies from an administrative standpoint, it ultimately lowers productivity, stifles innovation, and drives up costs across individual departments. Each specialty within a healthcare organization — whether oncology, cardiology, musculoskeletal (MSK), behavioral health, pain management, or neurology — has unique needs that Epic’s broad solution struggles to address effectively, resulting in suboptimal outcomes and wasted resources.
Change is inevitable in healthcare, as the industry increasingly demands a faster rate of innovation and the ability to invest in focused, departmental solutions that are interconnected in a network but not controlled by a single vendor. The current centralized model, dominated by Epic, is unsustainable in the face of these evolving needs. Healthcare providers and Payors alike require systems that can quickly adapt to the unique challenges of their specialized areas — whether it’s oncology, cardiology, and behavioral health within health systems or care gaps and risk adjustment within payor organizations — while seamlessly sharing information across departments and stakeholders. The question is not if, but when this transformation will occur. What remains unclear is the catalyst that will spark this revolution in healthcare IT, akin to how the PC revolutionized enterprise computing. The next wave of innovation may well be driven by new technologies or platforms that unify and accelerate advancements across these diverse fields, leading to the kind of industry-wide change that personal computers brought to enterprise IT. Just as the PC shifted the balance of power from centralized IT departments to individual business units, the future of healthcare IT is likely to see a similar shift. Specialized platforms will empower healthcare providers and payors to choose and integrate the best tools for their specific needs, potentially forcing large incumbents like Epic to adapt or face obsolescence. This shift will pave the way for a more decentralized, innovative, and cost-effective approach to healthcare IT, one that better aligns with the dynamic and complex nature of modern healthcare.
